Every month in my
Top Funds Report
newsletter, I write a summary of my views about specific funds and fund
companies based on queries from readers. These are often funds that have
undergone management changes or that are new issues, a little less well
known, or not as widely covered as some of the high fliers. One of the
bigger changes in the fund landscape over the past year or so was the
takeover of the former high-flying Sprott funds by a management spinoff
company called Ninepoint Partners.
Here’s a look at a how a couple of the funds have fared.

The first thing that you might ask is, “What the heck is Ninepoint and
where did they come from?” Well, Ninepoint Partners is the new name for the
funds managed by Sprott Asset Management, which were bought out by the
management group in 2017. Why “Ninepoint”? According to the company, “The
Ninepoint name is derived from the ‘nine point puzzle,’ where four,
continuous straight lines are used to connect all nine points of a 3x3
grid. The only way to solve the puzzle is to draw “outside the box.”

Sprott had historically been very focused on resource and commodity funds.
But with the arrival of
John Wilson
as co-CEO of Ninepoint, it began shifting to a more alternative focus.
Under the Ninepoint banner, this trend continues, as the group expands its
product shelf into interesting and innovative parts of the investment
universe. As a matter of interest, Ninepoint isn’t in the startup category
either: It has around $3 billion in assets under management.

The International Small Cap Fund is one of their newer offerings, having
debuted last March, and on the surface it may not look that interesting.
But it is unique in that there aren’t that many small-cap funds that don’t
invest in the U.S. market. In fact, there is only a handful of
international small-cap offerings.

This fund is managed by
Robert Beauregard
and his team at Global Alpha, a firm founded in partnership with Connor
Clark & Lunn (CC&L) in 2008, which today manages more than $1.5
billion in international and global small-cap mandates. CC&L offers a
global mandate that includes U.S. small- and mid-cap stocks. The process
used in the CC&L and Ninepoint funds is identical, as the manager aims
to add 3% in excess return over a market cycle.

The managers use a rigorous, research-driven, bottom-up, multi-step
investment process that is fundamentally-driven and looks to identify
high-quality companies that can deliver earnings growth and that are
trading at levels not yet recognized by the market. They also look for
growth themes that can help create a tailwind for the companies.
Consequently, the result is a diversified portfolio of between 50 and 70
names.

While this is a new retail offering, it has been available institutionally
for many years, hand has delivered very strong risk-adjusted returns that
have met or exceeded the return target. This fund is worth a look for those
seeking a small-cap fund that does not invest in the U.S.

Formerly the Sprott Canadian Equity Fund, which was very much a small-cap,
resource-focused fund, Ninepoint replaced managers James Bowen and Jonathan
Wiesblatt with
Robert Dionne
of Connor Clark & Lunn-owned Scheer Rowlett & Associates, which has
$2.4 billion in assets under management. The fund debuted in March 2018.

The new fund name pretty much sums up the fund, which holds a concentrated
portfolio of between 15 and 25 of the manager’s best Canadian equity ideas.
Mr. Dionne’s active-management investment approach is very institutional in
nature, and he uses a fundamental, bottom-up, value method in researching
and selecting investments.

I certainly believe this will be a much better fund with the new management
team at the helm. However, until we get a few more quarters of data, I
can’t really comment on its overall quality, so I am taking a wait-and-see
approach on this one.

Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
of
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.

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performance is made or implied. This article is for information purposes
only and is not intended as personalized investment advice.